Buying A Business or Capitalizing your Business

Buying a business is not as simple as buying a piece of real estate. Sure, a real estate deal is complex but there are fewer unknowns and potential pitfalls. A business's success is tied to the market for its goods and/or services, its ability to beat the competition, its access to resources, and the capabilities of its management team and its employees. A strong business plan is only half of the story.

Some of the risks involved with starting a business can be mitigated by buying a franchise or by buying an existing business. In both cases, much of the initial groundwork has been laid and many of the initial hurdles have been overcome. Of course you have to usually pay a little more for this head-start on success but that is the cost of avoiding some of the risks.

Because of the uncertainties of starting a business, many traditional IRA custodians will not allow IRAs in their care to participate in such investments. They are fine with you buying stock in a company but less inclined to let you get in on the ground floor. This is well within their rights and is usually made plain in their plan documents from the start. However, such risk aversion rarely produces extraordinary returns.